Westonci.ca makes finding answers easy, with a community of experts ready to provide you with the information you seek. Experience the convenience of finding accurate answers to your questions from knowledgeable professionals on our platform. Discover in-depth answers to your questions from a wide network of professionals on our user-friendly Q&A platform.
Sagot :
Sure, let's address each question step-by-step in detail:
### 5.1 Asset Efficiency (Return on Assets) for 2012
The return on assets (ROA) measures how efficiently a company can manage its assets to produce profits. It is calculated as:
[tex]\[ \text{Return on Assets} = \frac{\text{Net Profit}}{\text{Total Assets}} \][/tex]
For 2012:
[tex]\[ \text{Net Profit}_{2012} = R1,743 \, \text{m} \][/tex]
[tex]\[ \text{Total Assets}_{2012} = R9,256 \, \text{m} \][/tex]
Thus,
[tex]\[ \text{Return on Assets}_{2012} = \frac{1,743}{9,256} \approx 0.1883 \text{ or } 18.83\% \][/tex]
### 5.2 Comment on the Movement in Asset Efficiency
For 2011, the return on assets was given as 1.16 times (116%).
Comparing the two years:
[tex]\[ \text{Change in ROA} = \text{ROA}_{2012} - \text{ROA}_{2011} = 0.1883 - 1.16 = -0.9717 \text{ or } -97.17\% \][/tex]
#### Reasons for Change:
1. Decline in Efficiency:
- The significant decrease in ROA from 116% to 18.83% indicates a decline in the efficiency of utilizing assets to generate profit.
2. Variation in Net Profit and Assets:
- This drastic change can be attributed to variations in net profit or total assets between the two years. If the total assets increased significantly without a corresponding rise in net profit, or if net profit declined, the ROA would be negatively affected.
### 5.3 Calculate the Profitability (Net Margin) for 2012
The net margin indicates the percentage of profit a company makes for every dollar of sales. It is calculated as:
[tex]\[ \text{Net Margin} = \left( \frac{\text{Net Profit}}{\text{Sales}} \right) \times 100 \][/tex]
For 2012:
[tex]\[ \text{Sales}_{2012} = R10,937 \, \text{m} \][/tex]
[tex]\[ \text{Net Profit}_{2012} = R1,743 \, \text{m} \][/tex]
Thus,
[tex]\[ \text{Net Margin}_{2012} = \left( \frac{1,743}{10,937} \right) \times 100 \approx 15.94\% \][/tex]
### 5.4 Comment on the Movement in Net Margin
For 2011, the net margin was given as 15.2%.
Comparing the two years:
[tex]\[ \text{Change in Net Margin} = \text{Net Margin}_{2012} - \text{Net Margin}_{2011} = 15.94\% - 15.2\% = 0.74\% \][/tex]
#### Reasons for Change:
1. Slight Improvement:
- The net margin increased slightly by 0.74%, indicating a modest improvement in profitability.
2. Variations in Sales and Net Profit:
- The shift in net margin may result from changes in net profit or sales figures. If the net profit grew at a faster rate than sales, it would lead to a higher net margin and vice versa.
### 5.5 Significance of Du Pont Analysis
The Du Pont Analysis is a powerful tool used to decompose the return on equity (ROE) into three major components: profitability, efficiency, and leverage. Understanding each component's contribution allows more insight into the factors driving financial performance.
1. Profitability:
- This is reflected in the net profit margin, showing how much profit a company generates from its sales.
2. Efficiency:
- Measured by asset turnover, showing how effectively a company uses its assets to generate sales.
3. Leverage:
- Represented by the equity multiplier, indicating the degree to which a company is financing its operations with debt versus equity.
By breaking down ROE into these components, the Du Pont Analysis provides a clearer picture of what is contributing to a company's financial performance and highlights areas where management might focus to improve overall profitability.
### 5.1 Asset Efficiency (Return on Assets) for 2012
The return on assets (ROA) measures how efficiently a company can manage its assets to produce profits. It is calculated as:
[tex]\[ \text{Return on Assets} = \frac{\text{Net Profit}}{\text{Total Assets}} \][/tex]
For 2012:
[tex]\[ \text{Net Profit}_{2012} = R1,743 \, \text{m} \][/tex]
[tex]\[ \text{Total Assets}_{2012} = R9,256 \, \text{m} \][/tex]
Thus,
[tex]\[ \text{Return on Assets}_{2012} = \frac{1,743}{9,256} \approx 0.1883 \text{ or } 18.83\% \][/tex]
### 5.2 Comment on the Movement in Asset Efficiency
For 2011, the return on assets was given as 1.16 times (116%).
Comparing the two years:
[tex]\[ \text{Change in ROA} = \text{ROA}_{2012} - \text{ROA}_{2011} = 0.1883 - 1.16 = -0.9717 \text{ or } -97.17\% \][/tex]
#### Reasons for Change:
1. Decline in Efficiency:
- The significant decrease in ROA from 116% to 18.83% indicates a decline in the efficiency of utilizing assets to generate profit.
2. Variation in Net Profit and Assets:
- This drastic change can be attributed to variations in net profit or total assets between the two years. If the total assets increased significantly without a corresponding rise in net profit, or if net profit declined, the ROA would be negatively affected.
### 5.3 Calculate the Profitability (Net Margin) for 2012
The net margin indicates the percentage of profit a company makes for every dollar of sales. It is calculated as:
[tex]\[ \text{Net Margin} = \left( \frac{\text{Net Profit}}{\text{Sales}} \right) \times 100 \][/tex]
For 2012:
[tex]\[ \text{Sales}_{2012} = R10,937 \, \text{m} \][/tex]
[tex]\[ \text{Net Profit}_{2012} = R1,743 \, \text{m} \][/tex]
Thus,
[tex]\[ \text{Net Margin}_{2012} = \left( \frac{1,743}{10,937} \right) \times 100 \approx 15.94\% \][/tex]
### 5.4 Comment on the Movement in Net Margin
For 2011, the net margin was given as 15.2%.
Comparing the two years:
[tex]\[ \text{Change in Net Margin} = \text{Net Margin}_{2012} - \text{Net Margin}_{2011} = 15.94\% - 15.2\% = 0.74\% \][/tex]
#### Reasons for Change:
1. Slight Improvement:
- The net margin increased slightly by 0.74%, indicating a modest improvement in profitability.
2. Variations in Sales and Net Profit:
- The shift in net margin may result from changes in net profit or sales figures. If the net profit grew at a faster rate than sales, it would lead to a higher net margin and vice versa.
### 5.5 Significance of Du Pont Analysis
The Du Pont Analysis is a powerful tool used to decompose the return on equity (ROE) into three major components: profitability, efficiency, and leverage. Understanding each component's contribution allows more insight into the factors driving financial performance.
1. Profitability:
- This is reflected in the net profit margin, showing how much profit a company generates from its sales.
2. Efficiency:
- Measured by asset turnover, showing how effectively a company uses its assets to generate sales.
3. Leverage:
- Represented by the equity multiplier, indicating the degree to which a company is financing its operations with debt versus equity.
By breaking down ROE into these components, the Du Pont Analysis provides a clearer picture of what is contributing to a company's financial performance and highlights areas where management might focus to improve overall profitability.
We appreciate your time. Please come back anytime for the latest information and answers to your questions. Thank you for your visit. We're dedicated to helping you find the information you need, whenever you need it. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.
